1. Complinet Webinar February 25, 2010 Ann Oglanian President and CEO ReGroup, LLC Compliance Professional of Yesterday, Today and Tomorrow

2. Speaker: Ann Oglanian President and CEO of ReGroup, LLC, a San Francisco-based consulting firm ReGroup provides strategic and tactical guidance to investment advisers, boards of directors, hedge funds and broker/dealers Areas of expertise: strategic planning, organizational development, operation efficiency, risk management, compliance programs, executive recruiting Over 20 years of professional experience in the financial services industry and a JD 2 ©ReGroup, LLC 2010

3. Agenda The compliance profession: a review Using yesterday and today to provide insight on tomorrow Educated guesses and wish list What can compliance professionals do to prepare? Introducing a debate: Is compliance a “Profession”? Should it be? 3 ©ReGroup, LLC 2010

5. Yesterday: the role of compliance An afterthought A second job for the office manager Subordinate to the legal function Overhead Expectation = “Keep me out of jail” 5 ©ReGroup, LLC 2010

6. Today Top of mind Increasing recognition: the role is evolving Redefinition of essential skill sets Move to the executive office A client of the legal function Recognition of compliance its own budget line Risk Management De facto Chief Ethics Officer Expectation: Competitive Advantage 6 ©ReGroup, LLC 2010

8. Coordinate analysis and action

9. Transparency into risk, exposure and performance

10. Identify and assess risks

11. Prioritize actions

12. Use technology for multiple purposes

13. Efficiency

14. Automation

15. Seeing connections

16. Plan future approach

17. Get it done!

18. Operate in isolation

19. Get resources from whereverSource: AMR Research 7

20. Evolutionary Process Other industries More mature, more integrated We’re going where they are already Evolving: Expectations Compensation Skill Sets Management Mindset Law vs. Compliance Conflicts and Liability The CCO’s Mindset 8 ©ReGroup, LLC 2010

21. 1. Expectations - Skills Strategic and Tactical Higher Profile Management/Delegation Communication Business Analysis and Insight Effective Use of Technology ©ReGroup, LLC 2010 9 Risk Assessment and Analytics Ethics Management Manage dilemma: The Opposable Mind Tell the Truth

22. Expectations – Delivering Value More money for compliance More compliance for the money Use of specific priorities to drive deliverables Measurable: moving toward evidence-based evaluation 10 ©ReGroup, LLC 2010

23. Overhead vs. Value-Added Assist in protecting the firm’s reputation Design a compliance program to meet regulatory requirements and improve internal efficiencies Strengthen client relationships; improve sales and retention 11 Create transparency by packaging information in a manner designed to enhance decision-making Reduce regulatory and business risks Improve individual employees’ efficient execution of their compliance responsibilities Interact, transact and integrate with vendors ©ReGroup, LLC 2010

24. 2. Compensation Skilled compliance professionals are garnering higher salaries and higher corporate positions Law degrees = a premium Sources of information Advice to CEOs: recruit and retain 12 ©ReGroup, LLC 2010

25. Hard skills: assumed Know the rules, write policies and procedures, training, sanctioning, ethics, identify conflicts of interest, assess risk… Soft skills make the difference #1 Skill = Communication The Market’s View: CCO Recruiters 13 ©ReGroup, LLC 2010

26. 3. Skill Sets Greater skills are needed to support compliance programs: Communication Conflict Management Strategic Planning Complex Project Planning Ethics and Telling the Truth to Power Credibility Knowing the business Emergence of certification programs 14 ©ReGroup, LLC 2010

27. 4. Management’s Mindset A greater understanding of: The need to resource compliance Getting the CCO involved in planning earlier A higher expectation of competitive advantage A higher expectation of executive leadership A greater amount of focus and questioning: Are we doing a good job? How much is enough? 15 ©ReGroup, LLC 2010

28. 5. The Practice of Law vs. The Practice of Compliance Tomorrow Recognition that compliance is a unique function Not subservient to the law; the law is a compliance tool Lawyers interpret the law (what) and must focus upon protecting the firm Compliance professionals implement (how), and create transparency 16 ©ReGroup, LLC 2010

29. The Practice of Law vs. The Practice of Compliance Pfizer Corporate Integrity Agreement between The Office of Inspector General of the Department of Health and Human Services and Pfizer The CCO shall not be, or be subordinate to, the General Counsel or Chief Financial Officer 17 ©ReGroup, LLC 2010

30. 6. Conflicts of Interest Emerging realities of conflicts between compliance professionals and their firms Emergence of ‘compliance counsel’ Awareness of need to protect from liability: Premium on working for an ‘ethical’ firm Insurance coverage Indemnification 18 ©ReGroup, LLC 2010

31. 7. The CCO’s MindsetTHE MIND-SET OF THE TRUSTED PROFESSIONAL Professionals have a bias for results. Professionals don’t just try...they’re invested! Professionals realize (and act like) they’re part of something bigger than themselves. Professionals have standards that transcend organizational ones. Professionals know personal integrity is all they’ve got. Professionals aspire to be masters of their emotions; not be enslaved by them. Professionals aspire to reveal value in others. Professionals continue to learn throughout their careers. 19 © Wiersma & Associates

32. Required By Law The law gives the Compliance Program legitimacy and relevance… The Compliance Program is the only risk management function that is required by law You give the Compliance Program credibility. 20 ©ReGroup, LLC 2010

33. Setting StandardsExpectations for Compliance Professionals* Be proactive, inquisitive, able to exercise professional skepticism, and able think critically Contribute to the identification, assessment and mitigation of compliance risk Assist in the creation of policies and procedures to address the identified risks Properly and appropriately escalating compliance issues Participate as appropriate in industry efforts to develop and implement good compliance practices for advisers ©ReGroup, LLC 2010 21 Speech by Gene Goehlke, SEC, OCIE, 2005

34. Setting StandardsExpectations for Compliance Professionals* Conduct compliance responsibilities in accordance with the highest ethical standards Demonstrate knowledge of the firm’s technical compliance requirements Know the role of the compliance department; Demonstrate knowledge of the business Conduct compliance responsibilities in a consultative and professional manner ©ReGroup, LLC 2010 22 Speech by Gene Goehlke, SEC, OCIE, 2005

35. Should Compliance be a Profession? A profession forms when: Any trade or occupation transforms itself through the development of formal qualifications based upon education, apprenticeship, and examinations, the emergence of regulatory bodies with powers to admit and discipline members, and some degree of monopoly rights. Law Accounting Medicine Estheticians 23 ©ReGroup, LLC 2010

36. Gaps Ethics Conflict between the CCO and the Firm Standards Definition of the function “Serving the Public”? Liability DOJ statements regarding ‘going after’ the gatekeepers, including compliance professionals who ‘should have known’ Credibility 24 ©ReGroup, LLC 2010

37. Pros Recognizes the ‘practice of compliance’; builds credibility A professional organization would: Set standards of conduct Advocate on behalf of members Counsel professionals on ethical issues Provide continuing education Status: puts compliance on an equal footing with related professions – law, auditing, CFA Support higher compensation May engage academics to respond with programs 25 ©ReGroup, LLC 2010

38. Cons It’s already a profession Educational requirements might keep talented people out of the job Expensive Compliance is too varied for a single profession Health Care IA BD Unnecessary burden 26 ©ReGroup, LLC 2010

39. Regulatory Recognition FINRA: Compliance Officer - Series 14 A qualification examination intended to insure that the individuals designated as having day-to-day compliance responsibilities for their respective firms or who supervise ten or more people engaged in compliance activities have the knowledge necessary to carry out their job responsibilities. 110 multiple choice questions; 3 hours testing time. Required by the New York Stock Exchange. 27 ©ReGroup, LLC 2010

40. Where do we go from here? Will these patterns continue? How should compliance professionals prepare? Keep learning the business Develop skills – purposefully Focus on insight vs. information 28 ©ReGroup, LLC 2010

41. Ann Oglanian aoglanian@regroupllc.com 415-681-2230 29 Thank You